Sparebank 1 Ostlandet · OSL:SPOL
Sparebank 1 Ostlandet — SpareBank 1 SR-Bank — Q4 2018 Earnings Presentation
53 slides from Sparebank 1 Ostlandet's earnings presentation, Feb 7, 2019
Slide 1: Fourth Quarter 2018
Slide 2: Disclaimer
Disclaimer This presentation contains forward-looking statements that reflect management’s current views with respect to certain future events and potential financial performance. Although SpareBank 1 SR-Bank believes that the expectations reflected in such forward-looking statements are reasonable,
Slide 3: The leading financial group in the southwest of Norway
Rogaland The leading Population 476.000 financial group Market share 35% Year of establishment 1839 in the Market strategy Market leader southwest of Unemployment rate 2.5% Norway Hordaland Population 525.000 Market share 6% Year of establishment 2006 Market strategy Growth Unemployment rate 2.6% Ag
Slide 4: Strong result with income growth and good cost control
Strong result with income growth and good cost control • Pre-tax profit for the quarter is NOK 676 million compared to NOK 700 million last year ‐ Return on equity after tax 10.1% • Pre-tax profit year-to-date is NOK 2.892 million compared to NOK 2.610 million last year ‐ Return on equity after tax
Slide 5: Key figures 2018, financial targets and estimates for 2019
Key figures 2018, financial targets and estimates for 2019 Return on equity CET 1 Growth in loans 11,0% 11,3% 11,5% 15,0% 14,7% 14,6% 7,6% 4,0 % - 6,0 % 4,0 % - 6,0 % Target 2018 2018 Target 2019 Target 2018 2018 Target 2019 Target 2018 2018 Target 2019 Growth in costs Impairments Dividend share < 5
Slide 6: Key figures – quarterly development
Key figures – quarterly development Return on equity CET 1 12,6% 15,1% 15,0% 14,8% 14,7% 14,7% 12,3% 11,4% 10,3% 10,1% Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Cost ratio Earnings per share 41,0% 42,1% 42,9% 2,48 40,1% 38,9% 2,41 2,18 2,06 2,03 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q4 17
Slide 7: Key figures – annual development
Key figures – annual development Return on equity CET 1 11,0% 11,3% 14,7% 15,1% 14,7% 10,0% 2016 2017 2018 2016 2017 2018 Cost ratio Earnings per share 40,9% 40,7% 40,9% 8,98 8,16 6,87 2016 2017 2018 2016 2017 2018 7
Slide 8: Income statement
Income statement Group Income Statement (MNOK) 31.12.2018 31.12.2017 Q4 18 Q3 18 Q2 18 Q1 18 Q4 17 Net interest income 3.439 3.162 926 871 842 800 819 Net commission and other income 1.437 1.524 350 349 370 368 367 Net income on investment securities 569 634 68 175 213 113 204 Total income 5.445 5.3
Slide 9: Change in profit 31.12.2017 – 31.12.2018
Change in profit 31.12.2017 – 31.12.2018 3.500 219 2.892 3.000 216 - 26 65 - 62 2.610 2.500 2.000 1.500 1.000 500 0 31.12.2017 Net interest income incl. Other income Net income on Total operating expenses Impairments on loans 31.12.2018 commission from investment securities and financial covered bon
Slide 10: Key figures
Key figures 31.12.2018 31.12.2017 Q4 18 Q3 18 Q2 18 Q1 18 Q4 17 Return on equity after tax (%) 11,3 11,0 10,1 12,6 12,3 10,3 11,4 Net interest margin (%) 1,54 1,52 1,59 1,53 1,52 1,50 1,50 Impairments on loans in % of gross loans incl. covered bond 0,17 0,29 0,18 0,12 0,21 0,16 0,26 companies Loans
Slide 11: Consolidated income profile
Consolidated income profile 1.276 1.212 1.220 1.186 1.168 334 347 330 331 338 16 19 36 23 30 926 819 842 871 800 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Net interest income Commission income from covered bond companies Net commission and other income 11
Slide 12: Lending and deposit margins
Lending and deposit margins Lending margins* Deposit margins 2,76% 2,74% 2,78% 2,74% 2,73% 2,77% 2,71% 2,71% 2,72% 0,34% 0,24% 0,24% 0,22% 0,24% 1,78% 1,79% 1,69% 1,69% 1,59% 0,13% 1,50% 1,51% 1,50% 1,38% 0,03% 0,04% -0,01% 0,04% -0,03% -0,05% -0,08% -0,06% -0,09% -0,09% -0,15% -0,18% Q4 16 Q1 17 Q2
Slide 13: Lending volume and 12 months growth
Lending volume and 12 months growth Corporate Market (incl. Capital Markets) 80 000 15,7 % 70 000 12,2 % 15% 60 000 9,6 % 50 000 10% MNOK 40 000 3,8 % 2,4 % 5% 30 000 20 000 -0,7 % -2,8 % -1,9 % 0% 10 000 -3,5 % 0 -5% Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Volume Growth % Retail Marke
Slide 14: Loan portfolio as at 31.12.2018
Loan portfolio as at 31.12.2018 • Gross loans (incl. covered bond companies) as at 3,0% Agriculture / forestry / fishing 31 December 2018 amount to NOK 201.4 billion 3,4% compared with NOK 187.1 billion at the same Supply and construction 2,2% 2,0% time the year before. Industry and power/water 2,3%
Slide 15: Loan to value ratio on home mortgage loans
Loan to value ratio on home mortgage loans • The proportion of loans with a loan-to- value ratio 100% of less than 85% is high. ‐ 89.1% of the exposure is within 85% of the assessed value of collateral. 80% 60,6% 58,8% 60% 40% 28,4% 30,3% 20% 7,2% 7,1% 3,8% 3,8% 0% Below 70 % 70 - 85 % 85 - 100 % Ab
Slide 16: Deposits volume and 12 month growth
Deposits volume and 12 month growth • Last 12 months deposits increased by NOK 3.4 Corporate Market* billion to NOK 98.8 billion. 60.000 24,7% 22,7% 20,7% 25% ‐ Corresponds to an increase in the period of 50.000 40.000 14,0% 15% 3.6%. 10,0% 8,3% MNOK 30.000 0,2% 4,4% 5% • Increased deposit growth in
Slide 17: Net commission and other income
Net commission and other income MNOK 31.12.2018 31.12.2017 Q4 18 Q3 18 Q2 18 Q1 18 Q4 17 Payment facilities 260 262 66 72 59 63 65 Savings/placements 196 198 47 49 48 52 47 Insurance products 189 208 46 47 47 49 52 Commission income real estate broking 382 389 98 94 109 81 94 Guarantee commission 10
Slide 18: Net income on investment securities
Net income on investment securities MNOK 31.12.2018 31.12.2017 Q4 18 Q3 18 Q2 18 Q1 18 Q4 17 Dividends 12 11 0 0 1 11 0 Investment income, associates 366 425 113 94 102 57 154 Securities gains/losses 65 127 -51 42 69 5 24 - of which capital change in shares and certificates 163 136 11 56 90 6 44 - o
Slide 19: Subsidiaries
Subsidiaries Subsidiaries MNOK 31.12.2018 31.12.2017 EiendomsMegler 1 SR-Eiendom AS Number of sales 6.487 6.565 Operating profit before tax 11 27 SR-Forvaltning AS Capital under management (BNOK) 11 11 Operating profit before tax 35 33 FinStart Nordic AS* Operating profit before tax 60 6 SpareBank 1
Slide 20: Ownership interests
Ownership interests Ownership interests MNOK 31.12.2018 31.12.2017 SpareBank 1 Gruppen AS Interest ownership 19,5 % 19,5 % Profit after tax 289 353 Adjusted profit previous years 0 -4 SpareBank 1 Boligkreditt AS* Interest ownership 4,8 % 8,0 % Profit after tax -3 -25 SpareBank 1 Næringskreditt AS In
Slide 21: Operating expenses
Operating expenses MNOK 31.12.2018 31.12.2017 Q4 18 Q3 18 Q2 18 Q1 18 Q4 17 Total personnel expenses 1.297 1.263 330 322 326 319 333 IT expenses 331 317 85 80 83 83 82 Marketing 88 73 26 22 24 16 20 Other administrative expenses 99 88 26 24 25 24 26 Total administrative expenses 518 478 137 126 132
Slide 22: Impairments on loans and financial commitments / Stage 3
Impairments on loans and financial commitments / Loans and financial commitments defined as Stage 3* Impairments on loans and financial commitments Changes in gross loans and financial commitments defined as Stage 3 IAS 39 IFRS 9 IAS 39 IFRS 9 1,54% 1,45% 1,46% 0,26% 0,21% 0,18% 0,16% 0,12% 1,13% 1,
Slide 23: Impairments on loans and financial commitments
Impairments on loans and financial commitments Impairments in income statement (MNOK) 31.12.2018 31.12.2017 Q4 18 Q3 18 Q2 18 Q1 18 Q4 17 Impairments Corporate customers 324 482 96 62 100 66 89 Impairments Retail customers 0 59 -4 -3 -1 8 29 Change in collective impairments on loans 2 0 2 Net impair
Slide 24: Funding
Funding ‐ NSFR* 121% ‐ LCR** 167% ‐ NOK 11.6 billion net refinancing need over the next 12 months ‐ Deposits to loans ratio 51,4% Annual funding maturity 22,0 20,0 18,0 16,0 14,0 12,0 NOK Billion 10,0 8,0 6,0 4,0 2,0 0,0 2019 2020 2021 2022 2023 2024 2025 2026+ Funding ex. CB Covered Bonds *The net
Slide 25: Solid capital ratio
Solid capital ratio • As of 31 December 2018, SpareBank 1 SR-Bank met ROE ROE ROE all of the regulatory requirements by a good margin 10,0 % 11,0 % 11,3 % • SpareBank 1 SR-Bank’s Pillar 2 requirement has been CET 1 CET 1 set at 1.7%, down from 2.0% (set in 2016), with 17,5 % 17,9 % 17,6 % 15,0 % 14,
Slide 26: MREL
MREL Main features from Ministry of Finance regulation based on «BRRD»: MREL based on Ministry of Finance • Requirements enter into force 1 January 2019. • Issuers shall be fully MREL compliant by 31 December 2022. • The FSA will set requirements individually for each bank. • Covered bonds issuers a
Slide 27: Outlook – Still optimistic
Outlook – Still optimistic • Expectations of a continued upswing and higher growth in the Norwegian economy for 2019 will continue to produce increased growth in the group’s market areas. • Optimism in Southern Norway. Companies are reporting increased investments and improved profitability. ‐ Oil i
Slide 28: Important strategic steps
Important strategic steps • Greater diversification in lending to companies in terms of both geography and industries. • Strong growth in corporate customers. 2,500 new customers gained and points of contact with the customer were doubled in 2018. • Greater efficiency in the corporate market due to
Slide 29: A surprising number of companies expect profitability to improve
A surprising number of companies expect profitability to improve Business survey main index. Counties • Upswing for oil, industry and export 75 companies. Agder Rogaland Hordaland Oslo Total Neutral 70 • Optimism in all of the counties: Oslo, Hordaland, the Agder counties and 65 Rogaland. 60 • Highe
Slide 30: All participants
30 All participants in/Gruinderhub get their ideas tested. For Lena, this has F | 2 ‘oming Home We h produced solid : E 7 ee ship, we ded results. Her success 4 héakd and seen, - is mainly due to her | Syelitelevc x ; and | developed further. unique commitment OE / rr ) ie to Sanasella. = — LENA STA
Slide 31: We have invested in the future and created new jobs in communities
We have invested in the future and created new jobs in communities • 16 different classes have been conducted since autumn 2015. • More than 125 startups have taken part. • 250 entrepreneurs have acquired new knowledge. • More than 270 new jobs have been created. • Total turnover of more than NOK 80
Slide 32: APPENDIX
APPENDIX 1) Macro 2) Risk 3) SpareBank 1 SR-Bank 32
Slide 33: Norwegian unemployment rate reduced to low level
Norwegian unemployment rate reduced to low level Marked reduction in Rogaland in 2017 and 2018 Norwegian unemployment rate, %, registered (NAV), seasonal adj., monthly 6 5 4 3 2 1 0 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Norway Rogaland Hordaland Vest-Agder Norway, broader measure (SSB AK
Slide 34: Stable house prices in Norway over the past year
Stable house prices in Norway over the past year Stable in most counties, but somewhat more volatile in Oslo House prices. NOK per sqm. Average all homes. Monthly 80.000 70.000 60.000 50.000 40.000 30.000 20.000 10.000 0 2003 2005 2007 2009 2011 2013 2015 2017 Stavanger region Bergen Kristiansand re
Slide 35: Increasing petroleum activity on the NCS in 2019
Increasing petroleum activity on the NCS in 2019 The activity fell from 2014 to 2017, was stable in 2018 and is likely to increase by 10% in 2019 • Total activity increased by over 60% from 2007 to Petroleum activity on Norwegian Continental Shelf. BNOK (2018 NOK). Source: NPD 2014. Thereafter, tota
Slide 36: Retail trade in Norway increasing by two to four percent
Retail trade in Norway increasing by two to four percent Growth has been highest in Oslo, but growth abated in 2018 Retail sales (excl. auto), annual change in turn-over from same 2-month period previous year 12% 10% 8% 6% 4% 2% 0% -2% -4% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Norge Roga
Slide 37: APPENDIX
APPENDIX 1) Macro 2) Risk 3) SpareBank 1 SR-Bank 37
Slide 38: SpareBank 1 SR-Bank has a moderate risk profile
SpareBank 1 SR-Bank has a moderate risk profile in which no single event should be capable of seriously harming the bank's financial position 38
Slide 39: Risk management principles and market areas
• The core purpose of the banking industry is to create value by assuming deliberate and acceptable risk ‐ SpareBank 1 SR-Bank therefore invests significant resources in developing risk management systems, processes and expertise that are in line with leading international practice • The bank's prim
Slide 40: Commitment limits and property financing requirements
• The bank sets specific limits for the size of commitments as well as requirements concerning industry diversification ‐ The maximum total exposure to an individual customer must be significantly lower than the regulatory requirements ‐ The maximum unsecured exposure to an individual customer must
Slide 41: Risk profile of the loan portfolio
Risk profile of the loan portfolio • SpareBank 1 SR-Bank has a solid loan portfolio. Distributed by risk class The quality of the portfolio is stable. 100% 80% 60,3% 60,7 % • The loan portfolio consists mainly of small and 60% 40% 28,7% 29,7 % medium-sized loans. 11,0% 20% 9,7 % 0% 0.00 - 0.50 0.50
Slide 42: Risk profile – Lending to the retail market
Risk profile – Lending to the retail market • The quality of the retail market portfolio is Retail market portfolio distributed by risk class 100% 2,7% 2,6% 2,5% 2,6% 2,8% considered to be good and has low potential 16,6% 16,7% 16,3% 16,1% 16,7% 80% losses. 60% • The low risk profile is achieved thr
Slide 43: RWA home mortgages
RWA home mortgages • RWA on home mortgages reflects a solid and RWA home mortgages stable portfolio. 21,6 % 21,7 % 21,5 % 21,5 % 21,7 % 20,0 % 15,0 % 10,0 % 5,0 % 0,0 % 31.12.17 31.03.18 30.06.18 30.09.18 31.12.18 Home mortgages as defined in the Norwegian IRB framework; residential property must be
Slide 44: Risk profile – Corporate lending
Risk profile – Corporate lending • The quality of the corporate market portfolio is Corporate lending portfolio distributed by risk class good. There is a clearly defined framework that 100% 27,6% 25,0% 23,5% 25,1% 22,5% sets limit on what is funded and conditions for 80% particular funding purposes
Slide 45: APPENDIX
APPENDIX 1) Macro 2) Risk 3) SpareBank 1 SR-Bank 45
Slide 46: SpareBank 1 SR-Bank ASA
SpareBank 1 SR-Bank ASA Divisions of SpareBank 1 SR-Bank ASA Fully owned companies Partly owned companies BN Bank SpareBank 1 Gruppen EiendomsMegler 1 SR-Boligkreditt Capital Markets (23.5%) (19.5%) Leading real estate broker Covered Bond Funding Number of man-years: 27 Commercial bank located in Ho
Slide 47: SpareBank 1 Alliance
SpareBank 1 Alliance SpareBank 1 SpareBank 1 SpareBank 1 LO SpareBank 1 SMN Samspar SR-Bank Nord Norge Østlandet 19,5% 19,5% 9,6% 19,5% 19,5% 12,4% Products, commissions, dividends Sales, loan portfolios, capital Companies where SR-Bank has direct ownership SpareBank 1 Gruppen AS Selskaper hvor SR-B
Slide 48: Our purpose: Strength to growth and development
Our purpose: Strength to growth and development Objectives Financial goals • The purpose for SpareBank 1 SR-Bank is to add strength to growth and development. Our growth will give us the ability • Return on equity of 11.5% after tax in 2019. The longer term to provide profitability and value to the
Slide 49: Balance sheet
Balance sheet Balance sheet (MNOK) 31.12.2018 31.12.2017 Cash and balances with central banks 717 207 Balances with credit institutions 1.696 1.608 Net loans to customers 190.878 171.237 Certificates, bonds and other fixed-income securities 29.340 31.909 Financial derivatives 5.268 5.541 Shares, own
Slide 50: SRBANK share
SRBANK share • International ownership is Development in Price/Book Relativ share price development 26.6 % per 4. quarter 2018. 110 1,4 120 Index 100 = dec 31st 2017 100 110 1,2 • Total market value at 4. 90 100 quarter 2018 is NOK 22.8 80 1,0 90 NOK billion. 70 p/B 0,8 80 60 Price 70 50 OSEBX P/B 0
Slide 51: 20 largest shareholders as at December 2018
20 largest shareholders as at December 2018 • Ownership interests: Investor Number Stake Sparebankstiftelsen SR-Bank 72.419.305 28,3% • From Rogaland, Agder-counties and Hordaland: 43.5% Folketrygdfondet 18.930.821 7,4% (44.7%) State Street Bank and Trust Co, U.S.A. Nominee 10.346.404 4,0% • Interna
Slide 52: SR-Bank pr 31.12.2018
SR-Bank pr 31.12.2018 2018 2017 2016 2015 2014 2013 2012 Share price 89,20 87,00 60,75 39,30 52,50 60,25 37,20 Stock value (MNOK) 22.813 22.250 15.537 10.051 13.427 15.409 9.514 Book value per share, NOK (group) 82,27 77,24 71,54 66,14 60,28 55,00 49,48 Earnings per share 8,98 8,16 6,87 6,83 8,20 7,
Slide 53: Contact Details
Contact Details Adress Bjergsted Terrasse 1 Tel: +47 915 02002 Postboks 250 www.sr-bank.no 4066 Stavanger Management Arne Austreid CEO Tel.: +47 900 77 334 E-post: arne.austreid@sr-bank.no Inge Reinertsen CFO Tel.: +47 909 95 033 E-post: inge.reinertsen@sr-bank.no Investor Relations Stian Helgøy Inv